Sinking or soaring (or both)
A 20-year low in unemployment combined with huge potential job cuts from the UBS-Credit Suisse merger creates an interesting opportunity.
Dear Insider,
Jobs are good. Unemployment is bad.
The conventional wisdom may hardly be disputed. Ever…
But there is a fine twist on the topic, which makes examining the current situation in Switzerland worthwhile.
It may also point to opportunities in the future…
Quick hits:
📉 As low as ever
The Swiss job market continues at its torrid pace. With the latest data from RAV, the unemployment rate remains at 2.0%. Not since 2001 has the number of people without work in Switzerland during the month of March been lower. Month-on-month job hunters dropped by nearly 5’000 and year-on-year by more than 30’000.
🏛 Bankers on the street
The numbers being floated don’t look good. Swiss daily Tagesanzeiger reports that internal plans at UBS could see up to 30% of its staff cut after the merger with Credit Suisse. Politicians won’t be happy. Many jobs are expected to be made redundant in IT, support and back office staff. They may or may not find a new employer willing to pay as well as a big bank.
💸Ready to fly?
Popular Swiss news outlet Finews ran an opinion piece last week from legal expert Nicola Ramelet about the coming wave of new asset managers. In it, he theorized that many ex-Credit Suisse bankers will choose to set up their own asset manager firms. Now that FINMA has clarified the legal requirements and forced external asset managers (EAMs) to be regulated, the field is open for a wave of new experts.
💡The Point:
👉Unemployment used to be the most hated statistic in government. Now, in Switzerland at least, it underscores a healthy economy. But it may also point to sustained inflationary pressures and will contribute to increased migration to fill the open positions.
👉UBS will be anxious not to be labeled the bad guy by cutting tons of jobs. This could speak to a change of plans whereby the Credit Suisse domestic bank stays relatively independent. But lower end jobs can probably not be saved.
👉External asset managers, with boutique advisory setups, are a speciality of Swiss finance. With enough rich clients hanging around the country, with ever growing fortunes and an upcoming generational change, young and smart bankers may be able to position themselves extremely well.
💡The Insider Advantage:
The economic outlook in Switzerland remains strong. But at the same time, teutonic plates below the surface are shifting. Migration, debate about neutrality, banking crises and other elements all add up.
The country’s interdependence on the broader European and US system is part of the forces at play.
Like the US, Canada and western Europe, the low Swiss unemployment numbers point to sustained growth - or continued access to easy money. The latter is propped up by central bankers who are scared of causing market panic. But they keep raising interest rates at the same time.
The Swiss National Bank has (so far) moved in lock-step with the ECB and Fed when raising rates every quarter.
If one or two large “layoff” events happen in Switzerland it may not derail the growth trajectory. UBS redundancies would be roughly equivalent to the job cuts made by Meta, Amazon and Google in the US. There the narrative so far has been that the move will unleash new startups and potential growth - not create a drag on the economy and unemployment benefits.
If many former CS bankers choose to take their own path, they will almost certainly try to keep their current clients with them. The bigger banks like UBS or Julius Bär, who may have hoped to be the first stop of choice for jilted HNWIs from Credit Suisse, will now face greater competition.
While their will be consolidation, the coming years may actually see a return to the more fragmented financial sector in Switzerland.
And that may actually be a good thing…
We would love to hear your thoughts…!
➕The Bonus:
🎷Jazzy in Montreux - Fans of the iconic Montreux Jazz Festival will be delighted see Bob Dylan, Pete Methany and Iggy Pop as part of this year’s lineup. (Link)
🛑Sitting stooges - Pre-Easter holidaygoers bound for Tessin faced extra traffic jams with climate activists sitting on the highway to block traffic. (Link)
👎Glencore rebuff - The commodity trading giant’s plans to take over construction company Tuck has faced serious resistance. (Link)